JPM-AUSTRALIA FRSTTO MARKET Top Stories-20250813

FY25 Result: Share price overreaction

We maintain our Overweight recommendation despite yesterday’s (12 Aug) share price performance given: 1) Core segmentsstill have upside. 8% YoY EBIT growth in FY25 was good given the headwinds. Boral’s performance remains solid (in the faceof adverse weather and seasonality) and WesTrac services still has tailwinds (even if capital sales likely retrace to A$1.6-1.8bpa). Looking into FY26, the combined benefit of WesTrac parts pricing and non-recur of ANZAC day/Easter timing for Boralalone gets EBIT growth to the bottom end of the guidance range; 2) Balance sheet deleveraging provides optionality forgrowth. With leverage <2x, SGH has increased flexibility to invest in the operating business or look to additional growthdrivers; 3) Guidance a surprise but shouldn’t drive a de-rating. SGH’s increased weighting to WesTrac / Boral, solid EBITgrowth profile and quality management team mean its current multiple is not demanding when compared to the ASX 200Industrials ex-Financials. We retain our Overweight rating and lower our Jun-26 price target by 4% to A$54.50/sh.